NEW SUGGESTED APPROACH TO IR35 PUT TO HMRC
A new approach to IR35 has been put forward to HM Revenue & Customs ahead of the chancellorâs Autumn Statement next month
Outlined by the Chartered Institute of Taxation, the approach rejects the âSupervision, Direction or Controlâ test in favour of an annual reporting obligation on end-users
Based on each PSC contractor initially assessing whether or not IR35 applies, the end-user would then take that assessment and report to the Revenue whether or not it is in agreement
If the end-user was to âwilfullyâ mislead HMRC that IR35 did not apply, when in fact it did, then any debt owed by the PSC under IR35 would âfall backâ to the end-user, the CIOT said
This approach would be better than âSDCâ because, under such an âinherently subjective testâ, many PSCs who are âgenuinely in business for themselvesâ would be wrongly caught
So SDC would be contrary to an aim of the IR35 discussion document â not to widen IR35âs scope
It wouldnât simplify administration, nor would it cut non-compliance, CIOT added
It also believes that HMRC should accompany the new reporting obligation with a campaign to âgive greater publicity to their successes in IR35 casesâ, to increase awareness of the rules
The CIOTâs Colin Ben-Nathan said: âIt is clearly wrong that some people get away without paying the correct amount of tax and NICs because they are playing fast and loose with IR35 either through ignorance of the rules or deliberate non-compliance
âWe strongly recommend that the annual reporting option we propose is seriously explored by HMRC rather than imposing an obligation on businesses to account for tax and NICs at source on payments to PSCs, as put forward in the discussion documentâ
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